Recent Construction Legislation and Cases

Legislature Creates New Requirements for Prequalification of Bidders (October 2014)

In the Summer of 2014, the North Carolina Legislature enacted vast changes to the process by which prospective bidders on public construction contracts are prequalified. N.C. Sess. Laws 2014-42, amending N.C. Gen. Stat. § 143-135.8. Prequalification is defined as “[a] process of evaluating and determining whether potential bidders have the skill, judgment, integrity, sufficient financial  … Continue Reading


North Carolina Court of Appeals Distinguishes “Equitable Adjustment” Clause From “No-Damages-For-Delay” Clause

It is not unusual to see a “no-damages-for-delay” provision in a construction contract. But what happens if the contract also includes a separate provision entitling one party to an equitable adjustment for cost increases incurred after the project’s scheduled completion date? In Southern Seeding Service, Inc. v. W.C. English, Inc., 719 S.E.2d 211 (N.C. App.  … Continue Reading


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NC Construction Law Information

Bonds

On most public projects in North Carolina, the contractor is required to procure appropriate bonds.

  • Bid bond: Bid security in the form of a cash deposit or a bid bond must accompany most formal bids on public works in an amount of not less than 5% of the bid. N.C. Gen. Stat. § 143-129(b)
  • Payment bond: On most public projects, payment bonds in the amount of 100% of the construction contract are required to be posted. N.C. Gen. Stat. § 44A-26(a)(2)
  • Performance bond: On most public projects, performance bonds in the amount of 100% of the construction contract are required to be posted. This bond is solely for the benefit of the contracting body. N.C. Gen. Stat. § 44A-26(a)(1)

Choice of Law / Forum Selection Provisions

  • Choice of law provision: Provisions in any contract, subcontract or purchase order for the improvement of real property in North Carolina that purport to make the contract, subcontract or purchase order subject to the laws of another state are against the public policy of North Carolina and are void. N.C. Gen. Stat. § 22B-2
  • Forum selection provision: Provisions in contracts entered into in North Carolina that require the prosecution of any action or the arbitration of any dispute that arises from the contract to be instituted or heard in another state is against the public policy of North Carolina and is void and unenforceable. N.C. Gen. Stat. § 22B-3 ; N.C. Gen. Stat. § 22B-2

Indemnity

Construction contract provisions that attempt to provide for indemnification for damages caused by or resulting from the negligence, in whole or in part, of the indemnitee are unenforceable. N.C. Gen. Stat. § 22B-1

Licensing Laws

North Carolina regulates the practice of contractors and construction professionals through licensing statutes and regulations.

  • Architects: The practice of architecture is highly regulated for both the individual architect and the corporate or partnership practice of architecture. N.C. Gen. Stat. Chapter 83A
  • Engineers: The practice of professional engineering is highly regulated for both the individual engineer and the corporate or partnership practice of engineering. N.C. Gen. Stat. Chapter 89C
  • General contractors: General contracting is broadly defined to include many activities for which the proper type and level of licensure is required. N.C. Gen. Stat. Chapter 87, Article 1
  • Geologists: The practice of geology is subject to licensure. N.C. Gen. Stat. Chapter 89E
  • Landscape architects: The practice of landscape architecture is highly regulated. N.C. Gen. Stat. Chapter 89A
  • Landscape contractors: The practice of landscape contracting is subject to registration. N.C. Gen. Stat. Chapter 89D
  • Land Surveyors: The practice of land surveying is highly regulated for both the individual surveyor and the corporate or partnership practice of surveying. N.C. Gen. Stat. Chapter 89C
  • Specialty contractors: Plumbing, heating and fire sprinkler contractors (N.C. Gen. Stat. Chapter 87, Article 2), electrical contractors (N.C. Gen. Stat. Chapter 87, Article 4), and refrigeration contractors (N.C. Gen. Stat. Chapter 87, Article 5) are required to be properly licensed in North Carolina. N.C. Gen. Stat. Chapter 87

Mechanic’s Liens

Claims of lien on real property and claims of lien upon funds are subject to very specialized requirements. N.C. Gen. Stat. § 44A-7 – § 44A-24

No-Damage-For-Delay

On public construction projects, contractual provisions in prime contracts that purport to bar or limit compensable damages for delays caused solely by the owner or its agent are not enforceable. N.C. Gen. Stat. § 143-134.3

Pass-Through Claim

On public construction projects, a prime contractor may file an action against the owner on behalf of a subcontractor. N.C. Gen. Stat. § 143-134.2

Payments

Payments to contractors and subcontractors are statutorily regulated on all projects.

  • Prompt pay to contractor: On public projects, if the owner fails to tender payment to the prime contractor within 45 days of certain milestone events, interest at 12% per annum accrues on the amount owed. N.C. Gen. Stat. § 143-134.1
  • Prompt pay to subcontractors: On public projects, and on most private projects, if the prime contractor fails to tender payment to the subcontractors with 7 days of receipt of payment from the owner, interest at 12% per annum accrues on the amounts owed. N.C. Gen. Stat. § 143-134.1 ; N.C. Gen. Stat. § 22C-5
  • Pay-if-paid: Pay-if-paid subcontract provisions are unenforceable in North Carolina. N.C. Gen. Stat. § 22C-2

Public Bidding

Competitive bidding is required on most state and local public construction projects in North Carolina.

  • Formal bidding: On most state and local public construction projects, formal bidding is required. N.C. Gen. Stat. § 143-129
  • Construction methods: On most state and local public construction projects, contracts are put out for bid and awarded under one of the following methods: (1) multi-prime, (2) single-prime, (3) dual bidding—accepting both multi-prime and single-prime bids, (4) construction management at risk, (5) design-build, (6) design-build bridging, (7) public-private partnership or (8) alternative contracting method upon approval of the State Building Commission. N.C. Gen. Stat. § 143-128(a1)
  • Withdrawal of bid: Formal bids may be withdrawn prior to bid opening without forfeiture of bid security. After bid opening, formal bids may be withdrawn in only limited circumstances. N.C. Gen. Stat. § 143-129.1
  • Informal bidding: Local governments may use informal bid procedures on small construction projects. N.C. Gen. Stat. § 143-131
  • Bid protest: North Carolina does not have a formal bid protest procedure.
  • MBE/WBE: Public construction projects subject to competitive bidding are also subject to special minority business participation requirements stated as verifiable goals. N.C. Gen. Stat. § 143-128.2
  • Mediated Settlement Conferences: Most non-NCDOT public construction projects in North Carolina are subject to special rules for Mediated Settlement Conferences set forth by the State Construction Office. Rules

Statutes of Limitation and Repose

North Carolina statutes contain numerous time limitations within which actions must be commenced.

  • Contract actions: An action on a contract, express or implied, must be commenced within three years from the breach. N.C. Gen. Stat. § 1-52(1)
  • Contract actions under UCC: An action for breach of contract for the sale of goods under the Uniform Commercial Code must be commenced within four years from the breach. N.C. Gen. Stat. § 25-2-725
  • Action against land surveyor: An action against a registered land surveyor must be commenced within three years. N.C. Gen. Stat. § 1-52(18)
  • Action against local government: An action against a unit of local government upon a contract must be commenced within two years from accrual of the action. N.C. Gen. Stat. § 1-53(1)
  • Improvement to real property: An action arising out of the defective or unsafe condition of an improvement to real property shall not be brought more than six years (statute of repose) from the later of the specific last act or omission of the defendant giving rise to the cause of action or substantial completion. N.C. Gen. Stat. § 1-50(a)(5); N.C. Gen. Stat. § 1-50(f) (three year statute of limitation)
  • Mechanic’s lien: A claim of lien on real property must be filed within 120 days of the claimant’s last furnishing of labor or materials, and the action to enforce the lien must be commenced within 180 days of the claimant’s last furnishing of labor or materials. N.C. Gen. Stat. § 44A-12(b) ; N.C. Gen. Stat. § 44A-13(a)
  • Payment bond: An action on a public works payment bond must be brought no later than one year from the day on which the last of the labor was performed or material furnished by the claimant or one year from the day on which final settlement was made with the contractor, whichever is longer. N.C. Gen. Stat. § 44A-28